Any discrepancy in taxes deducted should be notified to the respective employer for making the necessary rectification
Tax return filing may be relatively complex in case you have changed your job and have worked with more than one employer during a particular financial year (FY). In this article, we have listed a few important aspects you need to be cognisant of while filing a tax return in such a scenario. The due date for filing the tax return by a salaried individual for FY 2018-19 is July 31, 2019.Include salary income from all employers
After the end of the relevant FY, you should collect a Form 16 and 12BA (annual tax deduction certificate) from each employer and verify the details of the gross salary paid and the Taxes Deducted at Source (TDS) thereon. Also, in the prescribed pro-forma recently notified by Central Board of Direct Taxes (CBDT) for issuing salary cum TDS certificate in Form 16 (Part B), a separate requirement has been inserted to include salary received from the previous employer.
Thus, an employee can file his/her tax return based on the consolidated Form 16 and 12BA issued by the new/current employer in case he/she has informed the salary details of the previous employer to the new employer (in prescribed Form 12B). In that case, the new employer is required to deduct TDS on the salary paid by him/her after duly taking into consideration such details and issue a consolidated Form 16 and 12BA.
In case you have not informed your new employer about the salary income paid by the previous employer (including TDS thereon) and your eligible tax-saving investments, there could be an additional tax liability. This liability could arise due to the tax slab benefit or deductions for eligible investment under Chapter VIA of the Income Tax Act, 1961 (the Act) being provided by both the employers in the TDS calculated by each of them.
Taxability of notice pay
If you have not served your notice period in full, the previous employer may have recovered a notice pay from your full and final settlement depending upon the company's policy and the terms of your employment agreement. There are conflicting judicial precedents in respect of the taxability of the actual salary received (net of recovery of the contractual notice period pay) vis-à-vis the taxability of the salary on the due/gross basis. This becomes relevant as the Act does not explicitly provide for a deduction of notice pay from the taxable salary income. Thus, it is pertinent to analyse the taxability of the recovery of notice pay, if any, by your previous employer vis-à-vis terms of your employment before filing the tax return.Disclosure of salary income from each employer
The salary from the respective employers would need to be reported separately in Schedule S – Details of Income from salary.
Disclosure of certain tax exempt salary components received on cessation of employment with your previous employer is important.
It is possible that you receive certain tax exempt salary components (e.g., gratuity, leave encashment, Provident Fund withdrawal, etc.) on cessation of employment.
There are certain components that would have to be disclosed as exempt allowance in Schedule S (e.g. gratuity, leave encashment, commuted value of pension, etc.), whereas certain payments (e.g. employer Provident Fund withdrawal, etc.) need to be reported in Schedule EI – Details of Exempt Income (Income not to be included in Total Income or not chargeable to tax). Hence, it is important to assess the exact nature of such payments and accordingly make appropriate disclosures in the income tax return form.
Verify TDS with Form 26AS
It is imperative that you verify that TDS deducted by all the employers is being appropriately reported in Form 26AS—an online annual tax credit statement that can be retrieved from the income tax e-filing portal. Any discrepancy should be notified to the respective employer for making the necessary rectification by amending their quarterly TDS returns. Unless such discrepancies are rectified, the tax return will not be processed by the tax department successfully and one may receive an intimation either for balance tax payable (to the extent of shortfall in pre-paid taxes or taxing of additional income) or refund not being processed.
Hence, it is necessary that you recognise the above aspects arising from being employed with more than one employer during the FY while computing your tax liability and filing your tax return for the said FY.(The writer is Partner and Head, Global Mobility Services, KPMG in India)